Hold Big Early Movers At Least 8 Weeks

In thoroughbred racing, the horse that is fastest out of the gate often doesn't win the race. On Wall Street, the fast starters almost always become the biggest winners. IBD founder and Chairman William O'Neil learned this lesson the hard way back in the 1960s. O'Neil bought a stock called Certainteed in early 1961. The stock blasted out of a high-tight flag pattern, then ran up for three weeks, surging more than 35%. Another up week followed. But the next week, the stock pulled back. It dipped again the following week. Concerned about losing a healthy gain, O'Neil sold the stock, banking a solid profit. Certainteed quickly bounced back. After meandering for a few weeks, it took off in the summer of that year, going on to huge gains. In the fall of 1963, O'Neil bought another stock, Syntex, out of a similar high-tight flag pattern. Syntex surged more than 20% in three weeks, then pulled back. A lesson was learned. O'Neil realized that stocks that make early moves after breaking out often go on to huge gains. He held tight to Syntex, which found support above its 10-week moving average. The stock powered higher, going on to become a runaway winner. O'Neil used the proceeds to buy a seat on the New York StockExchange. A new investing rule emerged. When a stock rises 20% or more in the first three weeks after breaking out, hold for at least eight weeks. Thousands of patterns confirm the value of this strategy. A stock will often stage a powerful breakout, run up for a bit, then pull back. By using this buy-and-hold rule, you eliminate any doubts you might have about a stock and whether or not you should take a quick profit. Futures exchange Chicago Mercantile Exchange fell into a base in January '05. After consolidating for eight weeks, the stock turned lower. That decline reset the stock's base count. The result was a deep double-bottom (1). Chicago Merc surged 20% from its June 2, 2005, breakout to a high of 265.80 three weeks later (2), then added a 16% surge during the week ended July 1 of that year. The stock stalled, breaching its 10-week moving average in brisk volume a few weeks later (3). But the 20% gain in three weeks meant the stock needed room to run. Chicago Merc spent less than three weeks beneath its 10-week line, then rallied. It went on to double from that point, overcoming a 10-week pullback in October '05 (4).

In thoroughbred racing, the horse that is fastest out of the gate often doesn't win the race. On Wall Street, the fast starters almost always become the biggest winners. IBD founder and Chairman William O'Neil learned this lesson the hard way back in the 1960s. O'Neil bought a stock called Certainteed in early 1961. The stock blasted out of a high-tight flag pattern, then ran up for three weeks, surging more than 35%. Another up week followed. But the next week, the stock pulled back. It dipped again the following week. Concerned about losing a healthy gain, O'Neil sold the stock, banking a solid profit. Certainteed quickly bounced back. After meandering for a few weeks, it took off in the summer of that year, going on to huge gains. In the fall of 1963, O'Neil bought another stock, Syntex, out of a similar high-tight flag pattern. Syntex surged more than 20% in three weeks, then pulled back. A lesson was learned. O'Neil realized that stocks that make early moves after breaking out often go on to huge gains. He held tight to Syntex, which found support above its 10-week moving average. The stock powered higher, going on to become a runaway winner. O'Neil used the proceeds to buy a seat on the New York StockExchange. A new investing rule emerged. When a stock rises 20% or more in the first three weeks after breaking out, hold for at least eight weeks. Thousands of patterns confirm the value of this strategy. A stock will often stage a powerful breakout, run up for a bit, then pull back. By using this buy-and-hold rule, you eliminate any doubts you might have about a stock and whether or not you should take a quick profit. Futures exchange Chicago Mercantile Exchange fell into a base in January '05. After consolidating for eight weeks, the stock turned lower. That decline reset the stock's base count. The result was a deep double-bottom (1). Chicago Merc surged 20% from its June 2, 2005, breakout to a high of 265.80 three weeks later (2), then added a 16% surge during the week ended July 1 of that year. The stock stalled, breaching its 10-week moving average in brisk volume a few weeks later (3). But the 20% gain in three weeks meant the stock needed room to run. Chicago Merc spent less than three weeks beneath its 10-week line, then rallied. It went on to double from that point, overcoming a 10-week pullback in October '05 (4).

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